Future Group may challenge arbitration award putting RIL deal on hold

 Kishore Biyani-led Future Retail on Monday hinted that it may challenge the arbitration award from the Singapore-based arbitration center before Indian legal forums, to ensure that its Rs 24,713 crore deal proceeds unhindered and without any delay.

Amazon.com Inc on Sunday won an interim award against its partner Future Group selling retail business to Reliance Industries Ltd for Rs 24,713 crore after a Singapore-based single-judge arbitration panel put the deal on hold.

Future Retail Ltd (FRL) in a statement on Monday said the company is examining the interim order passed by the Singapore International Arbitration Center (SIAC) in the arbitration proceedings invoked by Amazon under a shareholders' agreement with the promoters of Future group.

FRL, which operates retail chains as Big Bazar and Easy Day said it is not a party to the agreement under which Amazon has invoked arbitration proceedings and the deal cannot be held back through the arbitration process.

"FRL has been legally advised that actions taken by the FRL/its board, which are in full compliance of the relevant agreements and eminently in the interest of all stakeholders cannot be held back in arbitration proceedings initiated under an agreement to which FRL is not a party," the FRL statement said.

 

ALSO READ: Future Group stocks under pressure as deal with Reliance put on hold

As per the advice received by FRL, all relevant agreements are governed by Indian Law and provisions of Indian Arbitration Act for all intents and purposes and this matter raises several fundamental jurisdictional issues which go to the root of the matter.

"Accordingly, this order will have to be tested under the provisions of Indian Arbitration Act in an appropriate forum," said FRL adding "in any enforcement proceedings, FRL would take appropriate steps to ensure that the proposed transaction will proceed unhindered without any delay".

Passing an interim award in favour of Amazon, V K Rajah asked the Future group to put the deal on hold and said that the deal cannot go through until it finally decides the matter, sources with direct knowledge of the development said.

 

ALSO READ: Future-RIL deal: Amazon gets a favourable ruling in arbitration case

Amazon, which had agreed to purchase 49 per cent of one of Future's unlisted firms last year with the right to buy into flagship Future Retail Ltd after a period of three years to 10 years, had dragged Future to arbitration after the indebted Kishore Biyani group firm signed pact to sell retail, wholesale, logistics and warehousing units to billionaire Mukesh Ambani's Reliance.

"We welcome the award of the Emergency Arbitrator. We are grateful for the order which grants all the reliefs that were sought. We remain committed to an expeditious conclusion of the arbitration process," Amazon spokesperson had said on Saturday.

Amazon believes Future Group violated the contract by entering into the deal with rival Reliance.

The deal would have helped Reliance almost double its footprint as India's largest retailer.

Meanwhile, RIL retail arm Reliance Retail Ventures Limited (RRVL) has said it intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future group without any delay.

"RRVL has entered into the transaction for acquisition of assets and business of Future Retail Limited under proper legal advice and the rights and obligations are fully enforceable under Indian Law. RRVL intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future group without any delay," RRVL said.

With the dispute, Amazon is drawing the battle lines with Reliance in the race for India's estimated USD 1 trillion retail market, where online shopping is gaining ground. It needs the Indian partner to strengthen its foothold after becoming the authorized online sales channel for Future Retail's stores that sell everything from groceries to cosmetics and apparel.

Amazon has slapped a legal notice on Future Group, alleging that the retailer's Rs 24,713 crore asset sale to Reliance Industries violated an agreement with the e-commerce giant and dragged the Future group firm into arbitration.

Earlier on August 29, 2020, the Future group had announced sale of its retail, wholesale and logistic etc to Reliance Retail Ventures Limited, the retail arm of the Reliance Industries.

Amazon, last year, had bought a 49 per cent stake in one of Future's unlisted firms, Future Coupons Ltd, with the right to buy into flagship Future Retail after a period between three and 10 years. Future Coupons owns a 7.3 per cent stake in Future Retail.

The tussle between Future and Amazon comes at a time when Reliance has been bolstering its position in the country's retail segment.

Reliance Retail Ventures Ltd - run by India's richest man Mukesh Ambani - has been on a fund-raising spree and since September, it has raised Rs 37,710 crore by selling stake in its retail arm.

RRVL, operates India's largest, fastest-growing and most profitable retail business spanning supermarkets, consumer electronics chain stores, cash and carry wholesale business, fast-fashion outlets and online grocery store JioMart.

Future Retail hints at challenging arbitration order against Reliance deal

 BENGALURU (Reuters) - Future Retail said on Monday it was examining an order by an arbitration panel to put on hold its $3.38 billion asset sale to Reliance Industries, and would take steps in enforcement proceedings to close the deal without delay.

Shares in Future Retail were down 3.2% by 0630 GMT, while Reliance's stock fell 2.4%, weighing on the broader Mumbai market.
Amazon.com Inc received an emergency order from a Singapore arbitration panel to halt the two Indian companies from proceeding with the deal until an arbitration tribunal is formed, a source with direct knowledge of the matter told Reuters.
Amazon, which has alleged the deal breached existing agreements, last year bought a 49% stake in Future Coupons Ltd, which owns a 7.3% stake in Future Retail.
The investment came with contractual rights that include a right of first refusal and a non-compete-like pact, media had reported, and Amazon later started arbitration proceedings.
In a statement to Indian stock exchanges on Monday, Future Retail said it was not party to the agreement under which Amazon had invoked arbitration proceedings.
All relevant agreements were governed by Indian law and the matter "raises several fundamental jurisdictional issues," Future said.
Billionaire Mukesh Ambani's Reliance in August decided to buy retail, wholesale and some other businesses of Future Group in a deal valued at $3.38 billion, including debt.
Reliance Retail intends to complete the deal with Future Group without any delay, it said in a statement on Sunday. "The rights and obligations (under the deal) are fully enforceable under Indian Law," Reliance Retail added.
Two sources familiar with the matter said the temporary injunction was not automatically enforceable in India and that the order would have to be ratified by an Indian court.
In a statement, Amazon said: "We are grateful for the order which grants all the reliefs that were sought. We remain committed to an expeditious conclusion of the arbitration process."

(Reporting by Aditya Kalra and Euan Rocha; Writing by Ann Maria Shibu in Bengaluru; Additional reporting by Sachin Ravikumar and Vishal Vivek in Bengaluru; Editing by Nick Macfie, Peter Cooney and Sriraj Kalluvila)

Future Retail raises $500 million through dollar-denominated bonds

Kishore Biyani-led Future Retail on Wednesday said it has raised $500 million through dollar-denominated bonds.

"The company has successfully priced a $500 million Fixed Rate Senior Secured 144A/Reg S Bond for a 5-year (non-call 3-year) tenor at 5.600 per cent," the company said in a regulatory fiiing.

As per the company, the bond transaction also marks the first international bond deal from the retail and consumer sector space in India.

"We are overwhelmed by the strong response of the global investor community which is a testament to our strong credit story. This transaction would help us further diversify our sources of funding, Future Retail Limited (FRL) Joint Managing Director Rakesh Biyani said.

Proceeds from the offering will be utilised to purchase store assets from Future Enterprises Ltd which will help significantly improve EBITDA margin profile of FRL, Biyani added.

The company intends to use all of the proceeds to meet the capital expenditure for the acquisition of certain instore retail infrastructure assets from Future Enterprises Limited. The notes will be listed on the Singapore Exchange Securities Trading Limited (SGX- ST).

"The transaction witnessed 37 per cent participation from Asia, 42 per cent from the US and 21 per cent from EMEA with 84 per cent investment from long haul funds, 8 per cent from private banks, 5 per cent from insurance/pension funds and 3 per cent from banks and others," the filing said.

It further added that there has been strong demand from most of the blue chip names amongst the largest funds across the globe.

Deutsche Bank, Standard Chartered Bank, Barclays, J P Morgan and UBS acted as Joint Global Coordinators and Joint Bookrunners on the issue. SBICAP, Credit Suisse, Emirates NBD Capital and Rabobank acted as Joint Bookrunners, while A K Capital acted as Financial Advisor to the Issuer.

After board's nod, Amazon-backed Future Coupons to own 7.5% of retail arm

The board of directors of Future Retail on Saturday gave in-principal approval to the conversion of already allotted equity warrants to a promoter group entity, Future Coupons (FCPL). Once completed, Future Coupons, which till now held no shares in the retail arm, would own 7.5 per cent of Future Retail.

Out of the 3.96 million warrants issued to FCPL, the board Saturday approved conversion of 2.48 million warrants to the same number of Future Retail (FRL) shares, which translates into 4.7 per cent of its total shares. It further informed the Bombay Stock Exchange that the rest 1.48 million equity warrants can be converted any time before October 22.

Issued at a price of Rs 505 per warrant, the deal effectively means FRL would get Rs 2,000 crore from FCPL against the 3.96 million warrants.

The announcement comes after American e-commerce giant Amazon secured approval from the Competition Commission of India (CCI) to acquire a 49 percent stake in FCPL in November. Amazon.com NV Investment Holding, a direct subsidiary of Amazon.com, Inc, will receive both shares with voting rights and non-voting share of FCPL.

According to the CCI order, the deal involved two other key entities — Future Corporate Resources (FCRPL) and FRL. The details of the transaction between Amazon.com and FCRPL are not yet clear. FCRPL, a promoter group entity, is the largest owner of FRL with about 47 per cent of the retailing entity’s shares in its kitty.

Thus, after the deal is complete, Amazon-backed FCPL will hold around 7.5 per cent of FRL’s shares.

The money that Amazon is investing to purchase FCPL shares (at Rs 660 each), estimated at Rs 1,500 crore, may have been routed to FRL that is in need of funds.

The retailing arm of the Kishore Biyani family plans to invest in various projects including purchasing warehouse assets from Future Enterprises. Future Enterprises (FEPL) – a group entity that develops, owns and leases retail and warehouse infrastructure – is struggling with mounting debt. Its total debt rose 15 per cent year-on-year to Rs 6,717 crore at the end of 2018-19. The group has already announced plans to invest about Rs 4,000 crore into FEPL through FRL.

In fact, the FRL board Saturday informed the exchanges that it is planning to raise up to Rs 3,500 crore (US$ 500 million) through the dollar-denominated long-term borrowings to fund the asset purchases in tranches or at one go.

Further, the Future group is gearing up to expand its food-on-demand programme that would require it to invest Rs 1,000 crore and build hundreds of cloud kitchens and dozens of distribution centres. Named as India Food Grid, the project will connect the entire country through a multi-layer network.

According to Biyani, chief executive of Future Group, the plan is to integrate his food delivery business with his mobile application Future Pay to improve penetration. “Whichever way food is being consumed in India, we want to be part of that business,” he told this publication earlier.

Amazon’s investments are not without rationale, either.

Bound by a web of new rules for e-commerce players that stops them from selling products from subsidiaries on their own platforms beyond a certain threshold, Amazon’s investment in the group is aimed at bypassing the roadblocks. The indirect approach in acquiring equity stake in one of its rival entities is designed to make sure it can continue to sell products from Future group on its e-commerce platform.